It’s been a tough year for charities. Not only has trust in the sector declined following media coverage of poor fundraising practices, but demand for services has never been greater, as government policies force more people to turn to projects run by voluntary organisations. And at the same time, funding for charities is increasingly threatened by cuts to council budgets.

So, the helping hand offered by the Guardian Charity Awards 2016 to this year’s five winning charities couldn’t come soon enough. The awards, currently supported by Bates Wells Braithwaite, the FSI, Jigsaw24, Media Trust and the National Council for Voluntary Organisations, have been celebrating since 1993 the inspiring, innovative and life-affirming work performed by small social welfare charities across the UK.

Speaking at the awards ceremony in London on 13 December, the actor and activist Sir Ian McKellen said he was “humbled” by the winning charities’ work. “At a time when the protective arms of the state have become weaker, those of charities are even more important,” he said.

Marsh Community Centre has an unusually diverse user group, catering both to residents of an estate in one of the most deprived wards in Lancaster and Morecambe and to asylum seekers looking for refuge in the area.

The centre’s Open Access sessions help an average of 25 local residents a day with welfare support and advice. Meanwhile, the Lancaster and Morecambe City of Sanctuary Project, which started a year ago, provides welcome packs for asylum seekers and tailored support in areas including health, getting a lawyer and learning English. The judges were impressed with its innovative approach to boosting integration and building communities in an area that was previously almost exclusively white British. While there has been undeniable tension around the new arrangements, says centre manager Rebecca Joy Novell, attitudes are slowly changing.

“When you have breakthroughs, like when lads from different backgrounds sit and play [the computer game] Fifa together, it’s really magical,” she says.

During the summer, the centre, which has been running since 2003, was the venue for the Syrian People’s Cafe, in which new arrivals cooked for 500 members of the local community. With more asylum-seeking children arriving all the time, the charity will use its cash prize to develop a programme helping them to integrate with local young people, as well as purchasing school uniforms for them.

“Winning is really overwhelming,” says Novell. “It’s just nice for a little community charity to be acknowledged, because it highlights what we do: we invest a lot of time in people.”

The judges applauded Music Action International’s ability to bring people together through music and break down negative stereotypes, while transforming lives blighted by torture.

The charity offers refugees and asylum seekers therapeutic, creative music sessions that help reduce the psychological effects of trauma and isolation. Participants include survivors of torture, children and unaccompanied young people who have recently arrived from conflict areas. They create their own music and give free public performances at schools, community centres and arts venues.

By sharing the truth about refugee experiences in an uplifting and moving way, they aim to build stronger communities, especially in areas of disadvantage and deprivation. Since 2010, MAI has worked with more than 1,800 refugees and asylum seekers, reaching around 37,000 people through its shows. It will spend its prize money on school events, recordings and performances, to reach wider audiences still.

“Winning this award will have a fundamental impact in making refugees and asylum seekers feel they are being given some recognition of who they are, what they contribute and what they’re going through,” says Lis Murphy, the charity’s creative director.

Working in schools and also with vulnerable young people, including care leavers and youth offenders, MyBnk aims to help them avoid debt and live independently. It has already armed 160,000 11- to 25-year-olds with budgeting and saving skills.

The judges praised the way the charity involves young people in the creation of its programmes to ensure they are effective, and highlighted how successfully it has scaled up its work. Financial education is covered by a single bullet point in the national curriculum, says Declan Wilkes, MyBnk’s head of communications, and is not mandatory in academies, free schools, primary schools or sixth forms. The charity’s workshops come in time for some young people’s biggest “firsts” – from opening a bank account and leaving home, to accessing credit and starting university. MyBnk will use its prize money to deliver sessions to 150 vulnerable young people.

Winning will have an enormous impact, says Wilkes. “This really raises the flag that there’s a way of addressing some of the issues that cost us so much in adulthood. It’s a lightning rod for the cause, and it will definitely help us attract more support. More financial service companies, such as Prudential, are starting to back us – and this will help us demonstrate to corporates the value of scaling what works in the charity sector.”

The Refugee and Migrant Centre offers a range of help to asylum seekers, refugees and other vulnerable migrants in the Black Country – including accommodation, immigration and health advice, education, training and employment.

Now, thanks to its charity award, it will also be able to address mental health issues among traumatised asylum seekers. “For a long time we’ve identified this dire, unmet need,” says Heather Thomas, the organisation’s head of new projects. “Many of our asylum-seeking clients experience low-level mental health issues at least, because of the experiences in their home country that made them leave, as well as the journey here and then their experiences since arriving.

“People are suffering from sleeplessness, anxiety, depression, low moods. The need is probably bigger than any other health issues we’re addressing.”

Such clients aren’t able to get mental health support via mainstream routes because of wider issues impacting on their mental health – things like their legal status, accommodation and financial security – are largely unresolved. The centre, based in Wolverhampton, will use its prize money to pilot a six-week course teaching exercises to help manage stress and low mood, and hopes health service funders will support its continuation.

The judges were impressed by the depth and breadth of its impact, highlighting “a combination of solid support and innovation” and adding: “They are aspirational in what they do.”

Its community organisers bring together members in north-east Wales, including faith groups, community organisations and schools, to discuss new issues they are facing and to agree on action to be taken. They then arrange face-to-face meetings with decision makers such as MPs, Welsh Assembly members, councillors and business people.

The judges noted the real impact of TCC’s work, seen in the practical improvements won for communities, and praised its collaboration with other charities. Recent successes include a campaign calling on Wrexham council to sign up to the Syrian Vulnerable Persons Relocation Scheme. Winning will allow the 21-year-old charity to develop a stage further as it looks to develop and ideally increase its staff numbers and geographical reach, says lead organiser Sam Rex-Edwards. The tailored support element of the prize in trustee training, development and communications will be crucial, particularly for a charity that operates in a unique way.

“With such a small staff team where we’re wearing so many hats, it’s just going to be invaluable to have somebody else giving an external perspective and challenging us,” says Rex-Edwards.

“We’re overwhelmed and delighted to have won. It means so much to everybody.”